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Airlines covered by CORSIA face uncertain costs from this year as international aviation activity recovers, with the timing of procurement decisions in an uncertain market having a material impact on bottom lines.
The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) caps emissions at 85% of 2019 levels by requiring airlines to purchase carbon credits. CORSIA entered Phase 1 in 2024, with voluntary participation enforced by national governments for emissions through 2026. This will be followed by a Second Phase with mandatory participation for most ICAO member states from 2027-2035.
Estimating demand for CORSIA eligible credits requires modelling international aviation emissions over time for included countries. Fastmarkets takes a bottom-up approach, aggregating demand across individual airlines, routes, and regions, to offer granular insights into potential compliance obligations.
As of September 2025, 129 countries had confirmed their voluntary participation in CORSIA Phase 1. These include most high-traffic jurisdictions such as the U.S., the European Union, the UK, and several Gulf and Asia-Pacific nations. Together, these jurisdictions account for 64% of global international aviation activity.
Based on route-level modelling and anticipated air traffic recovery trajectories, our projections suggest that cumulative demand for carbon offsets during the 2024–2026 period will range from 150 to 175 million tonnes of CO₂. The midpoint of our forecast is 162 million credits1. However, recent analysis from IATA suggest there could be upside risk as aviation activity recovered more quickly than expected in 2024, with their own range of 146-236 million tonnes of credits required.
The Second Phase will see CORSIA become mandatory for virtually all ICAO member states, with limited exceptions for small emitters and least-developed countries. The inclusion of countries such as China, India, and Russia significantly expands the scope of covered emissions, from 64% to 87%.
Our baseline forecast projects cumulative demand during Phase 2 to reach 1-1.5 billion tonnes, with annual offset requirements ramping from 62-88 million in 2027 to 166-257 million by 2035. The total demand over the life of CORSIA Phases 1 & 2 could exceed 1.7 billion tonnes in our high-growth scenario.
Demand is highly concentrated amongst a relatively small group of carriers. Fastmarkets modelling suggests that the leading 10 airlines may collectively be responsible for 39% of total CORSIA demand during Phase 1. Airlines with a higher share of long-haul routes, older fleets, and limited SAF blending will likely face larger offsetting obligations.
The impact on airlines depends on timing of action as well as underlying airline characteristics such as profit margin and routes travelled. An analysis of the top 10 airlines in our Base & High scenarios suggests that Phase 1 obligations could range from 6-25% of in-year profits if paid at the end of the compliance window, or increasing from 1-4% of profits for 2024 obligations to 2-10% of profits for 2026 obligations annually, reaching a total Phase 1 cost of 5-18%. By waiting to retire credits at the end of the compliance period, airlines expose themselves to rising prices and face a much larger in-year burden
While demand projections point to significant volumes, a major challenge lies in the supply of credits that meet CORSIA Phase 1 eligibility criteria. As of September 2025, ICAO has fully approved a limited number of carbon standards (American Carbon Registry (ACR), ART TREES, Verra, Gold Standard, Climate Action Reserve (CAR), and the Global Carbon Council), with additional programs conditionally approved pending further evaluation. Credits must also be issued under approved methodologies, of vintage 2021 or later, have a first crediting period of 2016 or later, and receive host country authorization to avoid double claiming. Only credits meeting all these conditions, commonly referred to as Eligible Emissions Units (EEUs), can be used for CORSIA compliance.
So far, only 15.9 million credits from the jurisdictional REDD+ Guyana (ART 102) project are eligible for use in Phase 1. Additional projects are expected to become eligible later this year, but delays to authorisation timelines are common.
Supply during Phase 1 has so far been heavily constrained by the need for these authorisations. The process for host countries to issue a full corresponding adjustment can be long winded, with many countries still in the early stages of legislating their carbon market frameworks. In the absence of a corresponding adjustment, project developers can also secure a Letter of Authorization (LoA) from the host country and have an approved insurance product to protect against a potential risk of revocation. This insurance aspect has also been a delaying factor during Phase 1, with only the World Bank’s MIGA so far approved by Gold Standard. Verra and Gold Standard provided guidelines other insurance products would have to meet over the summer, but have yet to approve other providers, creating another near-term bottleneck to supply.
Based on project-level analysis, Fastmarkets estimate that 130-188 million eligible credits could be available for Phase 1 compliance. Under our base case, analysis indicates a potential deficit of 2 million credits, even if credit issuances are timely and not surrendered for other purposes such as voluntary demand or Article 6 use.
Beyond Phase 1, cumulative supply of CORSIA-eligible credits between 2028 and 2030 could reach 300 million tonnes. However, in a constrained scenario, characterized by continued authorization bottlenecks, available supply may lag forecast demand for several years, with the market not reaching balance until the early 2030s.
This imbalance may drive short- to medium-term price volatility and raise the cost of compliance for airlines, particularly in the 2025-29 window, as well as creating issues around non-compliance. Our price estimates for 2027 range from 30-40 USD, increasing from around 22.50 USD at end-August according to Fastmarkets’ CORSIA Phase 1 spot price, dependent on the evolution of supply and compliance enforcement, increasing to 30-45 USD by 2030.
While Phase 1 is voluntary, enforcement mechanisms vary by jurisdiction. Countries such as the UK (£100/tCO2) and Brazil (50 BRL/tCO2) have outlined penalty structures, while the specific penalty level is unclear in Canada, Japan, UAE, Qatar, and Switzerland. However, jurisdictions accounting for 50% of Phase 1 demand projections, including the United States, have not signified intent to enforce, suggesting demand for credits may fall below projections. Coordinated action by key regulators to audit and enforce compliance is needed to ensure demand materializes more robustly.
Delays in the issuance of host country authorizations or slow uptake by governments in establishing Article 6 frameworks could hinder supply development. If this causes credit shortages, ICAO or member states could ease obligations or delay compliance windows. Parties in the CORSIA market should plan for scenarios involving delayed compliance deadlines or phased ramp-ups in offsetting obligations.
The willingness and capacity of host countries to issue Letters of Authorization (LoA) remains a major swing factor. Political concerns about exporting carbon reductions in the face of upcoming NDC targets, administrative capacity constraints, or changing climate priorities could impact issuance volumes. To ensure sufficient liquidity in CORSIA’s market, the number of countries navigating the LoA process will need to grow rapidly to 2027.
It remains unclear how CORSIA will interact with other climate policies such as the EU ETS or domestic SAF mandates. In some regions, overlap or conflict may complicate compliance strategies for airlines. Additionally, geopolitical changes or regulatory pushback could result in countries withdrawing, delaying, or reshaping their participation in future phases. The scope of eligible credit types may also evolve. For example, ICAO could choose to expand acceptable methodologies to include novel carbon removal approaches or redefine program quality standards in future revisions.
CORSIA faces projected demand for 150-250 million credits annually by 2035, around 25% of the total carbon credit market. However, reaching this level in the next ten years requires concentrated scaling of credit supply, strengthening of political will, and increased international coordination between CORSIA member states and host countries issuing corresponding adjustments.
For airlines, this means:
· Anticipating variable carbon costs of up to 45 USD/tCO2 by 2030
· Locking in access to high-integrity credits early, before scarcity intensifies
· Exploring SAF and in-sector abatement as complements to offsetting
· Engaging with regulators and peers to support transparent and consistent enforcement across jurisdictions
For carbon project developers and intermediaries, this creates:
· A significant new buyer class and price premium for eligible credits
· A need to secure host country authorization and align with approved methodologies
· An incentive to collaborate with governments to streamline Article 6 readiness
· An opportunity to shape standards for quality and integrity in future supply pipelines
As CORSIA obligations materialise and supply dynamics become clearer, airlines face a clear incentive to create an active strategy for procurement, while developers need to act quickly to ensure supply is eligible for use in Phase 1, as the Phase 1 compliance deadline of January 2028 is fast approaching.
Fastmarkets delivers trusted insights and pricing across carbon credits, carbon removals, and compliance carbon markets. Our expert team brings decades of experience helping investors, corporates, project developers, and governments navigate risk, seize market opportunities, and understand the impacts of the rapidly evolving carbon market landscape. Discover more.